Western Economies: The New Great Risk?

Political upheaval and discontent will mark out 2012 as a year of great uncertainty, with one commentator telling CNBC that the changing world power structure means that the West’s traditional dominance in global economic and geo-political affairs is on the wane.

CNBC.com

“What is different now is that political risk is now a factor in western countries and this risk is becoming more important than it has been before,” Saker Nusseibeh Chief Executive at Hermes Fund Managers told CNBC’s “Squawk Box Europe.”

Ideas and theories purporting a declining West and declining western influence on the world order have been around for many years but the strength of emerging economies in recent years coupled with social factors such as changing demographics across both the developed and developing world have brought to the fore the notion that the West is in decline.

Nusseibeh suggests that dwindling natural and economic resources have made the “share of the pie smaller” which will inevitably lead to more tensions as a growing world population strives to stake its claim.

“People will fight over their share and that happens between countries as well as within countries – which we haven’t had since the 70s,” he said.

David Murrin, CEO at Emergent Asset Management, has talked frequently about the demise of the West and how the “paradigm of western economic power is really over” saying: “This is the end of the Christian Western Empire versus the rise of the whole emerging world led by China as the foremost and most powerful.”

Last week saw widespread anti-U.S. demonstrations which led to some high profile deaths across a number of Muslim countries following the release of a controversial film which mocked the prophet Mohammed. (Read more: Anti-US Protests Spread Across the Muslim World) Anti-austerity protests – which have frequently turned violent – have become a regular feature in euro zone countries where bailout programs have forced austerity across an already strained population.

Nusseibeh argues that internal tension is increasing in Europe between once friendly states as the disappearance of a traditional enemy leaves a gaping hole that needs to be filled.

“We have assumed for some time that tensions would be easy to deal with because there was a common enemy which China might fill, but what we’ve seen in recent weeks, the rhetoric out of Greece against Germany was surprising, the comments from Madrid were surprising,” he added.

However, he said there were still opportunities for those willing to play the discord and tension trade. Most traders and investment banks did not take account of political factors, he said.

“Political tension does allow people to make prices [and profits]," he said.

He believes traders have to think differently and think about political realities. We’re beginning to see how non-economic factors affect the markets, he said, and people will have to start learning again how to factor politics within developed markets.